CCI not to take any action against Hyundai

Madras High Court has asked the Competition Commission of India (CCI) not to proceed with any action against Hyundai. Hyundai is among one of the 14 carmakers slapped with a combined penalty of Rs 2,554 crore for failing to sell spare parts in the open market.

Hyundai moved the High Court against the summons issued by the Competition Commission of India (CCI). Upon hearing the submissions made by Hyundai, the Court reversed the Order and directed the Competition Commission of India not to proceed further with the matter till the final order is pronounced by the court.

Hyundai contended before the Court that, Director General of Competition Commission of India did not have the power to initiate investigation and that no materials, facts or figures were produced by Competition Commission of India. Hyundai further questioned the “selective approach” by Competition Commission of India, whose order excluded 12 original equipment manufacturers, including Renault, Jaguar and Volvo.

As reported by the Business Standard, other Original Equipment Manufacturers (OEM), which includes, Maruti, Hyundai, Nissan, Mercedes-Benz, BMW etc. have approached other various courts on the same issue. BMW, Maruti Suzuki India and Mercedes-Benz approached the Delhi High Court against the order. Delhi High Court in turn stayed a Rs 471.14 crore fine imposed on Maruti Suzuki, by the Competition Commission of India. Further, staying the Competition Commission of India’s order against BMW and Mercedes-Benz for three weeks Court asked them to move the Madras High Court, which was already hearing the matter for other OEMs.

Competition Commission of India earlier imposed penalties on Mahindra, Tata Motors, Hyundai Motor India Pvt Ltd, Toyota Kirloskar, Honda, Volkswagen India, Fiat, Ford India, General Motors India, Nissan Motor India, Hindustan Motors, Mercedes-Benz India, Maruti Suzuki, Skoda Auto India and BMW.

Delhi HC says CCI can appeal against stayed cases

A bench of Chief Justice G. Rohini and Justice Rajiv Sahai Endlaw of Delhi High Court, said in its judgment, that, “We are of the view that since the investigation by the director general forms part of the regulatory jurisdiction exercised by Competition Commission of India (CCI), any order hampering the investigation process directly affects the statutory functioning of Competition Commission of India (CCI)”. Delhi High Court also held that the Competition Commission of India (CCI) has the right to appeal in cases where the probes have been stayed by courts.

The order came after a Competition Commission of India (CCI) appeal in a dispute involving JCB India Ltd, in which a single judge of the HC had stayed all Competition Commission of India (CCI) proceedings, including the probe, after its director general raided JCB’s premises.

Under the circumstances, the right to assail an order staying the investigation cannot be confined only to the informant, but the Competition Commission of India (CCI) also being an equally aggrieved party, is entitled to do so.”

Doubts were raised whether Competition Commission of India (CCI) could file such an appeal, as it was the Competition Commission of India (CCI) that ordered the probe against JCB in the first place; the court ruled that Competition Commission of India (CCI) has the right.

The court also held that “the interference by us at this stage is unwarranted”. It asked both parties to raise their issues before the single judge who is hearing the case.

The ‘Perfectionist Aamir Khan’ acts ‘Imperfectly’ with CCI

Swarnim Shrivastava

Aamir Khan, popularly known as the perfectionist actor of Bollywood film industry, has been charged with penalties for infringement of Competition Act, 2002. As the Competition Act of India is civil in nature, there is no room for imprisonment, however penalising in monetary terms is provided for under the Act.

The Competition Commission of India (CCI), on the 15th of October – 2013, decided to initiate recovery proceedings against Aamir Khan and 8 other entities who have failed to pay penalties imposed on them. These penalties, which together amount to Rs. 2.17 Crore, have not been paid despite there being no appeal filed or appeal having been dismissed, the CCI said while publishing a list of these defaulters ((Available at http://www.financialexpress.com/news/cci-to-act-against-bollywood-star-aamir-khan-8-others-for-defaulting-on-fine/1182839 last accessed on October 26, 2013)).

The case goes back to 2010 ((Aamir Khan (Pvt) Ltd v Competition Commission of India (2010) 112 Bom. L.R. 3778 (India).))where the Bombay High Court ruled that the CCI has the jurisdiction to deal with intellectual property matters and can also decide constitutional, legal and jurisdictional issues. Regarding the jurisdiction of the CCI in intellectual property right matters, s.3 (5) (i) of the Competition Act provides for exceptions to IPRs. This provision is to ensure that s.3(1) of the Competition Act does not take away or restrict the right to restrain any infringement of IPRs or the right of any person to impose reasonable conditions for protecting his rights under the IP laws. The Competition Act 2002 overrides any other legislation enforced in India. However, its purpose is not to curtail other laws but to regulate the market ((The judgment of the court was based on ss.60, 61 and 62 of the Competition Act 2002. Section 62 balances the provision under s.60. It says that the Competition Act is in addition to and not in derogation to any other law for the time being in force.)). The CCI is the appropriate forum to decide on all the matters of competition law in India including IPRs.

The film associations have come under the scanner of CCI even before in the famous FICCI multiplex case ((Case no.1 of 2009 (FICCI Multiplex Vs UPDF & Ors.)), where the commission held the activities of the film associations which caused limit in the supply of films to be anti-competitive under Section 3(3)(b) of the Act.

The Commission said, “CCI could initiate prosecution under Section 42(3) of the Competition Act for not complying with the orders of the Commission and follow-up reference to Income Tax Department could be made for action on recovery certificates already issued to these entities ((Id at 1)).”

Section 42 deals with Penalty for Contravention of Orders of Commission. According to this section, if any person, without reasonable clause, fails to comply with the orders or directions of the Commission issued under sections 27, 28, 31, 32, 33, 42A and 43A of the Act, he shall be punishable with fine which may extend to Rs. 1,00,000/- per day, during which such non-compliance occurs, subject to a maximum of Rs. 10,00,00,000/- (Rs. Ten Crores), as the Commission may determine, or in case if such person fails to pay fine imposed above, or fails to comply the direction, then there is a provision of imprisonment up to three years or fine up to Rs. 25,00,00,000/- (Rupees twenty-five crore), or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit

Today, the violation of competition law is increasing at an alarming rate. In a developing economy like ours though the legislators have done their best to frame laws which would provide suitable conditions for a fair and perfect competition but still the present act requires some alterations to make it more effective in terms of imposition of penalty under the Competition Act, 2002.

Onion Cartel – Making the Consumer Cry

Swarnim Shrivastava, Student of Law, HNLU, Raipur

The other reason why onions made us cry was the recent inflation in its prices in India. Onion, being the most significant and common ingredient in Indian recipe, the increase in its price is having a huge impact on food security and consumer welfare. The high volatility in its price can have a disproportionate, non-linear or asymmetrical impact on the Indian economy.

If we look at the supply chain of the onion market, it goes through a long chain before the consumer could buy it. It passes through as many as four intermediaries before reaching the local vegetable market in a semi-urban or urban area. These middlemen, wholesalers, traders and commission agents usually charge fees and analysts estimate that by the time the vegetables make it to the stands in a retail market, their price has increased by almost six times. The transactions are usually not documented. When a genuine crisis looms, these middlemen often pile up supplies to create an artificial scarcity and siphon it off when prices shoot through the roof.

The Competition Commission of India (CCI) is trying to get some more information on the trends and practices about the onion markets ((Available at http://www.livemint.com/Politics/91WpLyOeAjLy13GItU9tkO/CCI-seeks-information-on-cartelization-as-onion-prices-soar.html)).   It was from the last year that CCI began to keep studying the price rise in the onion market ((Available at http://www.cci.gov.in/images/media/completed/AO.pdf)). It ordered a study to examine the volatility of prices and its relationship with distribution in the “loose and casual market”. The study revealed high prices of onions could not be attributed to exogenous stocks and mismatch between supply and demand, and even when supply was plentiful, the prices remained high. It noted that there is an almost oligopoly kind of situation and the trade was monopolised by a handful of cartels and recommended that until multiple players, ranging from producers to consumers, were involved, the price will be by a few traders dictated. The study also pointed out that National Agricultural Marketing Federation of India (NAFED) should procure onions directly from the farmers/producers rather than the traders.

 The Honourable Chairperson of the Commission, Mr. Ashok Chawla said, “We will see how it plays out further. We will see whether it warrants an examination or not.” Further, he added “This is again an issue on which the commission had spent some time in the past…and come to a conclusion that the markets don’t seem to be functioning very well. But there was no evidence of cartelization ((Supra note 1)).”

Mr. Chawla also noted that if there is hoarding of the commodity, then the matter would not fall under the ambit of the commission. “Now if it is hoarding, that is what the newspapers seem to be suggesting, then it is not for us to deal with it. It is for the government and the state governments to handle. We will see and at this stage we cannot say anything. We will see if we need to examine it further ((Supra note 1)).” The Commission seems toothless in this regard as the Competition Act, 2002 does not empower the Commission to nip this kind of unfair practice in the bud.

A plausible solution to this problem is to come out with an effective mechanism to break hold of the traders’ cartel in the onion market. The government should not just try to mediate the situation through curbing volatility in food prices and improving supplies, but formulate a strong anti-cartel enforcement method. With the increasing cartel activities, as seen in the cement and onion markets, it is high time that Indian Competition law should adopt criminal sanctions for cartels rather than carrying on with its soft law practice which fails to curb the unfair practice.

Further Reading